After two years of a lackluster economy, it was a welcome sign of economic rebound Carey- and the country’s other 400 plus professionals who make a living buying and selling, leasing, appraising, developing and managing The Bahamas’ scarce land – would normally be able to take such good news to the bank. But this time, the super salesman is uttering a word of caution.
“Under normal circumstances, any time you get $10 million worth of offers in a month, it’s cause to celebrate, not just for the individual but for the economy. It means the market is strong, it’s alive,” said Carey, one of a handful of the country’s real estate professionals to have earned both the prestigious Certified Residential Specialist and Certified International Property Specialist distinctions. “If it’s a good period for me, it’s good for the broker down the road, too, and good for the country as a whole.”
So why the caution? Why the concern?
“Bahamians are eager to buy,” said Carey, “and banks are eager to try to qualify them. But when they do qualify, they’re often shocked at what it really costs.” He cited the case of a working Bahamian couple with two incomes who would qualify for a 95% mortgage.
“Let’s say they were buying a house that cost $250,000 By the time all the costs are figured in – stamp duty on the purchase, stamp duty on the financing, legal fees, bank fees, insurance requirements on the mortgage, life insurance to cover the mortgage, real estate commission, they have to come up with $40,000 cash. And that’s with only a five per cent down payment required.”
If that family is dumbstruck by the cost of purchasing, scurrying to family members to help raise the additional cash, others are locked out of home ownership totally because of a combination of high purchasing costs and low personal savings – a dilemma the government tried to resolve by making the first $250,000 of a first home purchase stamp tax exempt. Carey credits the government for the economic stimulus, but said there is still confusion about how it works.
On the positive side, he says vacant land is especially attractive now because of its relative affordability. But vacant or developed, the greatest stumbling block to real estate recovery and home ownership is lack of personal cash reserves.
“Since 9/11, many people have depleted their financial resources, sold their shares in local companies, exhausted their savings. Bahamians are not the best savers anyway. We spend our disposable income and then some, our savings as a nation lags way behind comparable nations.”
When times were flush, this was not such a problem, but now, just coming back from recessionary times and facing the reality of the always high cost of purchasing property – between 13.5 per cent and 18 per cent on top of the purchase price – the lack of sufficient resources is going to mean that a lot of people who qualify for mortgages won’t be able to go through with moving into their home. “If we want the good life, we have to save for it, even in the bad times.”
By Diane Phillips
